As of December 6, 2023, certain fixed-term contracts are unlawful under the Fair Work Act 2009 (Cth) (FW Act).
Our employment lawyers explain the new rules and what businesses need to consider when using fixed-term contracts for their employees.
WORKPLACE LAW CHANGES: FIND OUT MORE
What is a fixed-term contract, and what has changed?
A fixed-term contract is a contract with an employee that has a set end date, which may be after a set period of time, a season or for a project. The FW Act now restricts the use of these contracts by prohibiting:
- Fixed-term contracts lasting more than two years in total;
- Multiple consecutive fixed-term contracts for the same employee;
- Attempts to alter employment terms to avoid these restrictions.
Employers must also give new employees who enter into a fixed-term contract the Fixed Term Contract Information Statement published by the Fair Work Ombudsman.
Failure to comply with these rules may expose employers and any accessories to civil penalties under sections 333E (restrictions on entering fixed-term contracts) and 333K (providing the Information Statement) of the FW Act.
How we can help you
Our Employment Law team can draft and review your contracts, policies, and procedures to ensure compliance with best practices and keep you updated on legislative and award changes. Find out more
Red flag review for businesses
CCIWA Members can access a complimentary red flag review of up to three internal employment documents (e.g., contracts) per financial year by one of our legal team.
- A lawyer will check compliance with legislation and flag any potential risks or issues.
- Reviews are completed within two weeks of receiving the document.
- If risks or issues are found, the lawyer will explain next steps and any costs, which are discounted for members.
- Any non-Members can access a one-time free red flag review of one document.
- Please send through copies of your internal employment documents as part of the red flag review to [email protected].
Are there any exceptions?
Yes, there are several exceptions under section 334F, including:
- Employees performing a distinct, identifiable task requiring specialised skills;
- Employees covering for another during a temporary absence;
- Employees whose income exceeds the high-income threshold in the year the contract begins;
- Contracts linked to government funding that lasts longer than two years, where there is no reasonable prospect of the funding being renewed (not just being uncertain or where it is unlikely that it will be renewed).
If your business or employees may qualify for an exemption, we recommend you obtain legal advice before proceeding.
Can we end the contract after two years and fill the position with another employee (and fixed-term contract)?
No, section 333H prohibits employers from making changes to the timing or terms of a fixed-term contract to avoid the operation of section 333E. The following are expressly prohibited under these anti-avoidance provisions:
- Terminating an employee’s employment for a period;
- Delaying re-engaging an employee for a period;
- Not re-engaging an employee, and instead engaging another to perform the same or similar work;
- Changing the nature of work or tasks the employee is required to perform; or
- Otherwise altering the employment relationship.
What happens if an employee keeps working after the contract ends?
Employers need to be careful when allowing fixed-term employees’ employment to “roll over” past the end date of their contract of employment.
Before the changes, the Fair Work Commission already warned that rolling over fixed-term contracts could result in the employment being viewed as permanent. Under the new rules, if a contract contains a prohibited term, it will be deemed ineffective, and penalties may apply. Allowing a contract to roll over may also breach section 333E.
Employers should review all fixed-term arrangements and consider transitioning employees to permanent contracts or exploring other workplace arrangements.
What should you do now?
While fixed-term contracts may still be used in some situations, businesses must ensure they comply with the updated FW Act.
We recommend seeking legal advice and review existing and future contracts to avoid breaching the legislation.
CCIWA's employment lawyers are currently offering a free employment contract compliance review (red flag review as mentioned above), which includes fixed-term contracts.
Find out how CCIWA’s employment lawyers can help you by contacting our legal team on 08 9365 7746, or via [email protected].
